US exporters of services protest unfair foreign barriers

ByThomas Watterson, Business and financial writer of The Christian Science MonitorJuly 22, 1981

Boston
— Now that the seven-nation economic summit meeting is over, executives of hundreds of American companies would like to suggest a lively topic for next year's meeting: a $60 billion US export business that is facing a rising wall of protectionism around the world.

The products from these companies are not goods wrapped in cartons and strapped to pallets, but are services such as advertising, insurance, film processing, shipping, banking, and data processing.

In places like Mexico, Venezulea, Argentina, West Germany, Sweden, Japan, and even Canada -- the site of this year's summit -- US service companies are dealing with an increasing variety of nontariff barriers.

* In Mexico, all ocean cargo going to or from that country must carry insurance from Mexican underwriters.

* In West Germany, all companies that use computers, including foreign firms that may only gather a small amount of information there, must do at least some data processing in that country.

* In Japan, cargo carried on foreign airlines must be checked through three warehouses, a process that can take several days, while cargo carried on Japan Air Lines gets overnight service in one warehouse.

* In Brazil, prints and copies of color feature films to be shown there must be processed there.

While protectionism in services was part of the preparatory discussions that led to the summit, it is considered unlikely that the topic was given much specific attention by the leaders themselves. And even if it does come up next year, US executives are not sure how much effect it would have in changing the policies of foreign governments.

"I don't know if we can change their minds, but I hope we can enact something in this country to change their minds," said Donald Miller, executive vice-president of American Marine Underwriters, a Miami firm that insures ocean cargo, except cargo going to Mexico and other countries with similar protections.

"It is situation where we deal in an almost totally free environment, but the other side doesn't," he continued.

A number of companies and US agencies, led by the Office of the US Trade Representative, are making an effort to change that environment.

"What we have here is a complete absence of the kind of international trade rules you have in goods," said Geza Feketekuty, assistant US trade representative, who is coordinating the effort to institute some rules.

This effort includes a program to identify all the specific industries, firms , and countries involved; preparations for multilateral talks among the members of the Organization for Economic Cooperation and Development; making sure that all future trade talks include discussions of protectionism in services; and a "major overhaul" of trade data. "TThe data we have is way out of date," Mr. Feketekuty said.

But a more aggressive solution would call for "a look at the various US laws pertaining to reciprocity in the international service area. . . . We want to find out what is the power of the president and other US authorities to deny access to countries that don't give us access."

The question of protectionism in services was considered for inclusion in the "Tokyo round" of trade negotiations, which ended in 1979. Because there had not been enough work done on the problem, "it was premature to bring it up then," Feketekuty said. "But we've been geeting more and more into the details in the last year or so."

An example of the lack of access for US companies involves something called "transborder data flows." Basically, these are any movements of information across international borders. But in a computer age, where intricate communication networks cover many countries but feed data to a central computer in one country, this process bumps up against a variety of laws concerning privacy, citizen access to information, and work for data-processing employees.

"The links between computers and telecommunication have become absolutely essential to international firms," said Joan Spiro, a vice-president at American Express and a former ambassador to the United Nations for economic and cultural affairs. But these links are being weakened by laws in countries like West Germany, Canada, and Japan requiring that some computing be done in host countries, restricting the type of information that can leave the country, or limiting the number of special communication lines that may be leased for data processing.

The restrictions mean that a company like American Express, which is involved in a variety of worldwide financial services, cannot completely centralize all its processing of credit card charges, traveler's checks, and other services, Ms. Spiro said.

For Flying Tiger, the Los Angeles-based air cargo carrier, the problems of sending freight to Japan represent another problem. In Tokyo, says Charles Malone, director of market development, Japan-bound cargo has to be processed through the New Tokyo Air Service Terminal, the International Air Cargo Terminal , and the Tokyo Air Cargo Terminals, while goods in Japanese carriers only go through one terminal. "In our business, the quality of ground service is the key difference to competition," Mr. Malone said.

"I could give you a litany of the problems we've had," said Ronald K. Shelp, vice-president for international Group, one of the largest insurance companies selling policies abroad. Several countries, he said, do not allow any foreign insurers to write policies. Some two dozen others, including Sweden and Kuwait, will permit only foreign firms to sell domestically types of insurance not sold by native companies.

Ms. Spiro sees some hope in the news that a few foreign companies and nations , including Hoechst, Air France, and Singapore, are calling for freer trade in services.